Friday, February 25, 2011

Making American Public Sector Workers Pay Instead of Greedy Corporates

In a bizarre, post-crisis turn of events, public sector activities, in general, and public sector workers, in particular, have become the targets of rightwing attacks in the US. Government spending is unsustainable it is being argued, and therefore, the public sector must be trimmed, by reducing jobs and slashing wages and benefits. It is indeed true that government spending as a percentage of GDP has risen sharply by around seven percentage points from 35 per cent to 42 percent (see Chart). But this occurred during the years after the crisis, when the government was pumping billions of dollars to bail-out the financial system that had speculated its way to failure and the firms that were damaged by the recession that ensued. It was the “subsidy” to capital rather than payments to workers that increased public spending to significantly higher levels.

It is to ostensibly address that problem, that the US House of Representatives recently approved a bill cutting spending this year by $61 billion. But the cuts don’t fall on the rich. Spending cuts, as is well known, fall heavily on social spending for the poor. Reduced social security for the poor and middle classes are the first consequences of austerity. But the impact soon goes further. It begins to adversely affect public sector employment and the benefits accruing to public sector workers.

At the moment, the attacks seem sharper in the states. In Wisconsin, for example, public sector workers are protesting an effort by Republican governor Scott Walker to reduce their benefits and limit their collective bargaining rights. Governor Walker wants workers to contribute more to their pension and health care plans, to roll back wage increases and limit the length of employment contracts. He also wants to bar most state and local government employees from negotiating on issues like benefits and work conditions. In addition, he is working to weaken unions by requiring them to face an annual vote to retain recognition, while pressuring workers to stop paying union dues and resign from union membership.

The reason for the attack is a budgetary deficit that is projected to touch $3 billion. The argument is that public sector pay and benefits are now way out of line with that in the private sector, necessitating some sacrifice on the part of these workers to redress imbalances in public finances. This is an argument that is being pursued in other states as well: New Jersey, Ohio, Tennessee and Indiana among them. And these states see the standoff between the unions and government in Wisconsin as the test of whether they can get their own public sector workers to accept austerity to resolve at least partly their fiscal problems.

Budgetary shortfalls are not, however, engineered by workers. They reflect the fact that governments have not been able to keep revenues buoyant as expenditures rise. One reason is the increasing reticence of governments to tax their citizens and their proclivity to offer huge tax concessions, especially to the more well to do among them. This inability to get citizens, especially the rich, to finance through taxes the social services and infrastructure they benefit from is one among the many failures inherent in a neoliberal ethos that celebrates the market and the wealth derived by a few from its workings. Seen in that light the attack on public sector workers is not the solution to the public sector crisis, but a way of diverting attention from its real sources and origins.

This reasoning is supported by the fact that judging by relative circumstances, Wisconsin should not be a state that should consider forcing public workers to tighten their belts to resolve the fiscal crisis and release resources to support a recovery. The state’s deficits are nowhere near the top of the league table in the US. Its unemployment rate is, at 7.5 percent, below the national average. And, its pension fund is assessed as being relatively robust. Ideologically, the attack on the public sector in the state of Wisconsin originates elsewhere and not in a fiscal crisis.

The attack on public sector workers is not a marginal issue. Such workers in state and city governments and educational institutions total 19.4 million and account for close to 15 per cent of the workforce in the US. Their significance does not stop here. Over the last four and half decades, the unionised segment of the non-agricultural workforce has collapsed from close to a third to just above 12 per cent. Much of the decline has been in the private sector, which has managed to push workers out of unions. According to figures from the Bureau of Labour Statistics, in 2009, the number of unionised public-sector employees (7.9 million) rose above that of private-sector employees (7.4 million), even though public sector workers are a minority even in the non-agricultural sector. Attacking unions in the public sector is, therefore, a larger attack on collective bargaining.

That attack comes at a time when workers are at the losing end of a sharp shift in the distribution of incomes. Workers wages and benefits have stagnated in real terms in the US for a long time now. On the other hand, incomes of the super-rich have exploded. According to University of Massachusetts economists Robert Pollin and Jeffrey Thomson, “during the economic expansion and Wall Street bubble years of 2002–07, the average incomes of the richest 1 percent of households rose by about 10 percent per year, more than three times that for all households. The richest 1 percent received fully 65 percent of all household income growth between 2002–07.”

Rather than tax these surpluses at the top of the pyramid to help resolve the crisis, the right has decided to shift attention to a small segment of the workforce they mistakenly claim is pampered. It is indeed true that the public sector is the standard bearer for the terms and conditions that constitute decent work. But that standard is not extravagant. For similar qualifications and experience public sector workers in the US earn less than those in the private sector. And even those terms have not been garnered with ease. Using the unavoidable public accountability of government, to sustain unions in the public sector, has ensured them. That union strength has in turn been used to win and retain better employment terms and conditions.

This points to points to the real factors explaining the effort to bash the public sector and its workers. It is part of an effort to weaken unions and dilute the standards to which private workers would aspire for. This would make stagnant real wages, deteriorating work conditions and high unemployment appear to be the unavoidable lot of the many, who will not have options to turn to and better conditions to look to and aspire for. Even when there is enough money to dole out concessions to the rich.

What is shocking is the context in which this occurs. America’s government has just poured billion of dollars to buy up worthless toxic assets, render banks that speculated their way to near bankruptcy solvent, and offer cheap credit to speculators who put their institutions and the country’s economy at peril, so that they can bounce back to profits and pay themselves big bonuses. The attack on public sector unions is only an effort to cover up these unjustifiable actions.